COL. FRANCISCO DELA MERCED, SUBSTITUTED BY HIS HEIRS NAMELY, LUIS CESAR DELA MERCED, BLANQUITA DELA MERCED NEE MACATANGAY, AND MARIA OLIVIA M. PAREDES, PETITIONERS, VS. GOVERNME…

Dela Merced versus Government Service Insurance System

The Case

This is a petition for review brought by the heirs of Francisco Dela Merced against the Government Service Insurance System and the spouses Victor and Milagros Manlongat. The petitioners seek to enforce a final and executory judgment that had already declared the foreclosure sale of five registered parcels of land in Pasig City null and void. The case matters because it confronts a recurring obstacle in execution: what happens when the losing party has already transferred the disputed land to other persons while the litigation was pending, and the judgment speaks only in the name of the losing party. The Court resolves whether the judgment may reach those transferees, and whether the Register of Deeds may be compelled to act beyond the literal words of the dispositive portion.

Procedural History

The original complaint for nullity of foreclosure was filed by Francisco Dela Merced before Branch 160 of the Regional Trial Court of Pasig City. The trial court ruled in his favor. On appeal, the Court of Appeals reversed the trial court. The case then reached the Supreme Court, which in a decision dated September 11, 2001 granted the petition, reversed and set aside the Court of Appeals, and reinstated the trial court decision. That judgment was entered on April 23, 2002 and attained finality.

When the petitioners moved for execution, the Government Service Insurance System opposed on the ground of exemption under its charter. The trial court granted execution but held the award of attorney's fees in abeyance. The Government Service Insurance System went to the Court of Appeals by certiorari and prohibition, and the Court of Appeals dismissed the petition in its decision of October 28, 2005. The Supreme Court denied the subsequent petition for review in a resolution dated February 12, 2007, entered in the Book of Judgments on October 2, 2007.

Meanwhile, the Register of Deeds of Pasig City reported that he could not implement the judgment as worded, because some lots had already been conveyed to other persons and other lots had no individual titles. The petitioners then filed a motion for supplemental writ of execution before the trial court, which denied it in the order of February 9, 2005. The petitioners assailed that order before the Supreme Court by petition for review.

Facts

The five parcels of land, identified as Lots 6, 7, 8, and 10 of Block 2 and Lot 8 of Block 8 of the Antonio Subdivision in Pasig City, were originally owned by Jose C. Zulueta and covered by Transfer Certificate of Title Number 26105. The Zulueta spouses mortgaged several lots under that title to the Government Service Insurance System, which foreclosed. Upon consolidation of ownership, the Zulueta title was cancelled and a new title, Transfer Certificate of Title Number 23554, was issued in the name of the Government Service Insurance System.

Francisco Dela Merced filed a complaint claiming that he, not the Zuluetas, owned the subject lots at the time of the foreclosure. He impleaded the Manlongat spouses, who claimed one lot by virtue of a sale by the Government Service Insurance System in favor of their daughter Elizabeth. On September 21, 1984, Dela Merced caused the annotation of a notice of lis pendens on the Government Service Insurance System title to protect his interests. He died in 1988 and was substituted by his heirs, the petitioners.

During the pendency of the case, the Government Service Insurance System conveyed Lot 8 of Block 2 to Diogenes Bartolome in 1985 and Lot 7 of Block 2 to Antonio Dimaguila in 1988. New individual titles were issued in their names, and in the name of Bartolome's assignee Zenaida Victorino, and each carried over the notice of lis pendens. The Supreme Court later nullified the foreclosure because these lots were never part of the mortgage agreement with the Zuluetas. When execution was sought, the Register of Deeds refused to cancel titles that no longer existed in the name of the Government Service Insurance System, and could not issue new titles for lots lacking technical descriptions.

Issues

• Whether or not the Government Service Insurance System may still raise the issue of its exemption from execution under its charter.
• Whether or not a final and executory judgment against the Government Service Insurance System and the Manlongats may be enforced against their successors-in-interest or the holders of derivative titles.
• Whether or not an order to cancel a title to a particular property includes an order to provide technical descriptions and segregate it from its mother title.

Applicable Provisions

Section 8 of Rule 39 of the 1997 Rules of Civil Procedure, which the trial court invoked in denying the motion, provides:

Section 8. Issuance, form and contents of writ of execution. The writ of execution shall be issued in the name of the Republic of the Philippines, be signed by the clerk of court, and shall contain the dispositive portion of the judgment or order and shall require the sheriff or other proper officer to whom it is directed to execute and deliver to the judgment obligee the property or money adjudged to him, or to perform the act or acts commanded in the judgment or order.

This provision confines execution to what has been decreed, and the trial court read it as barring any supplemental writ.

Section 10 of Rule 39 of the same Rules, which the petitioners invoked, provides:

Section 10. Execution of judgments for specific act. If the judgment requires a party to perform a specific act, and he fails to do so within the time specified, the court may direct the act to be done at the cost of the disobedient party by some other person appointed by the court, and the act when so done shall have like effect as if done by the party.

This provision supports the power of the court to direct the performance of acts necessary to carry the judgment into effect.

Section 39 of Republic Act Number 8291, the Government Service Insurance System Act of 1997, was raised by the Government Service Insurance System as exempting its funds and properties from court processes. The Court did not sustain that claim, holding the issue already finally resolved against it.

Ruling

On the first issue, the Court held that the question of exemption had already been finally decided against the Government Service Insurance System when the Supreme Court denied its petition for review, rendering the Court of Appeals decision final and executory. Its attempt to resurrect the issue is barred by the principle of law of the case, under which determinations of questions of law on a prior appeal to a court of last resort govern the case throughout its subsequent stages.

On the second issue, the Court ruled that the judgment may be enforced against the transferees pendente lite. A notice of lis pendens is an announcement to the whole world that the property is in litigation, and one who acquires an interest does so at his own risk. Since the notice was annotated as early as September 21, 1984 and was carried over to the titles of Dimaguila and Victorino, they had notice and were bound by the outcome. Their titles are derivative of a title finally adjudged null and void, and a spring cannot rise higher than its source. The Court rejected the argument that the dispositive portion must expressly mention derivative titles, because that narrow reading would render nugatory the principle that a final judgment binds the privies and successors-in-interest of a party.

On the third issue, the Court held that the order to cancel a title includes the authority to require the technical descriptions needed to segregate the lots from the mother title and to issue new titles in the petitioners' names, consistent with the power to execute judgments for specific acts.

Doctrine

A transferee pendente lite of registered land, whose title bears a notice of a pending litigation involving his transferor's title, is bound by the outcome of the litigation, whether for or against his transferor. His inclusion in the execution does not violate the immutability of final judgments, because it adds nothing to the judgment; it is merely a legal consequence of the rule that a final judgment binds the privy of a litigating party. The transferee cannot invoke the rights of a purchaser in good faith and cannot acquire better rights than his predecessor-in-interest.

Disposition

The Court granted the petition, set aside the trial court order denying the supplemental writ of execution, and directed the enforcement of the final judgment against the transferees pendente lite and the holders of derivative titles.

Remember This

The single line to memorize: a transferee pendente lite takes the property subject to the outcome of the litigation, and the judgment against his transferor may be enforced against him without violating the immutability of final judgments. Examiners use this case in civil procedure and land registration, particularly on lis pendens, execution against privies, and the scope of a writ of execution.